
1.
To identify: Break- even point of sales in dollars for year 2017.
1.

Explanation of Solution
Given,
Fixed cost is $250,000.
Calculated values,
Contribution margin ratio is 20% or 0.2 (from working note).
Formula to calculate break-even point of sales in dollars,
Substitute $250,000 for fixed cost and 0.2 for contribution margin ratio.
Working note:
Given,
Sales are $1,000,000.
Contribution margin is $200,000.
Formula to calculate contribution margin ratio,
Hence, contribution margin ratio is 20%.
Hence, break-even point of sale is $1,250,000.
2.
To identify: Break- even point of sales in dollars for year 2018.
2.

Explanation of Solution
Given,
Fixed cost is $450,000
Units sold are 40,000 units.
Calculated values,
Contribution margin ratio is 60% or 0.6 (from working note).
Formula to calculate break-even point of sales in dollars,
Substitute $450,000 for fixed cost and 0.6 for contribution margin ratio.
Working note:
Calculation of selling price per unit,
Calculation of sales in 2018,
Calculation of variable cost per unit,
As new machine reduced variable cost up to 50%, so the new variable cost will be $20.
Calculation of variable cost in 2018,
Calculation of contribution margin,
Formula to calculate contribution margin ratio,
Hence, contribution margin ratio is 60%.
Hence, break-even point of sale is $750,000.
3.
To prepare: A
3.

Explanation of Solution
Statement to show the contribution margin income statement
Particulars | Amount ($) |
Sales | 1,000,000 |
Less: Variable Cost | 400,000 |
Contribution Margin | 600,000 |
Less: Fixed Cost | 450,000 |
Pre Tax Income | 150,000 |
Working note:
Given,
The numbers of units sold is 20,000.
Calculated values (working note),
The selling price is $50.
Variable cost per unit is $40.
Calculation of total sales,
The total sales are $1,000,000.
Calculation of total variable cost,
The total variable cost is $800,000. As new machine reduced variable cost up to 50%, so the new variable cost will be $400,000.
Hence, the pretax income of Company A is $150,000.
4.
To identify: The required sales unit to earn the target income.
4.

Explanation of Solution
Given,
Fixed cost is $450,000.
Target net income is $200,000.
Calculated,
Unit contribution margin is $30.
Formula to calculate required sales will be,
Substitute $450,000 for fixed cost, $200,000 for target net income and $30 for unit contribution margin.
Working note:
Given,
Per unit selling price is $50.
Per unit variable cost is $20.
Calculation of unit contribution margin,
Calculation of required sales in dollars,
Hence, required sales are 21,667 units and $1,083,350.
5.
To prepare: A
5.

Explanation of Solution
Statement to show the contribution margin income statement
Particulars | Amount ($) |
Sales | 1,083,333 |
Less: Variable Cost | 433,333 |
Contribution Margin | 650,000 |
Less: Fixed Cost | 450,000 |
Pre Tax Income | 200,000 |
Working note:
Given,
The numbers of units sold is 21,666.67.
Calculated values (working note),
The selling price is $50.
Variable cost per unit is $20.
Calculation of total sales,
The total sales are $1,083,333.5.
Calculation of total variable cost,
Hence, the pretax income of Company A is $200,000.
Want to see more full solutions like this?
Chapter 18 Solutions
FINANCIAL & MANAGERIAL ACCOUNTING
- A trial balance will balance even if A. a journal entry to record the purchase of equipment for cash of $52100 is not posted. B. a $13100 cash dividend is debited to dividends for $13100 and credited to cash for $1310. C. a $510 collection on accounts receivable is credited to accounts receivable for $510 without a corresponding debit. D. a purchase of supplies for $595 on account is debited to supplies for $595 and credited to accounts payable for $559.arrow_forwardEquipment costing $15200 is purchased by paying $3800 cash and signing a note payable for the remainder. The journal entry to record this transaction should include a credit to Notes Payable. credit to Notes Receivable. credit to Equipment. debit to Cash.arrow_forwardAt December 1, 2025, a company's Accounts Receivable balance was $20160. During December, the company had credit sales of $54000 and collected accounts receivable of $43200. At December 31, 2025, the Accounts Receivable balance is A. $30960 debit. B. $30960 credit. C. $74160 debit. D. $20160 debit.arrow_forward
- Whispering Winds Corp.'s trial balance at the end of its first month of operations reported the following accounts and amounts with normal balances: Cash $14720 Prepaid insurance 460 Accounts receivable 2300 Accounts payable 1840 Notes payable 2760 Common stock 4600 Dividends 460 Revenues 20240 Expenses 11500 Total credits on Whispering Winds Corp's trial balance are A. $28980. B. $30360. C. $29900. D. $29440arrow_forwardSwifty Corporation's trial balance reported the following normal balances at the end of its first year: Cash $14440 Prepaid insurance 530 Accounts receivable 2660 Accounts payable 2130 Notes payable 3190 Common stock 4100 Dividends 530 Revenues 22040 Expenses 13300 What amount did Swifty Corporation's trial balance show as total credits? A. $31460 B. $32520 C. $30930 D. $31990arrow_forwardMonty Inc., a major retailer of high-end office furniture, operates several stores and is a publicly traded company. The company is currently preparing its statement of cash flows. The comparative statement of financial position and income statement for Monty as at May 31, 2020, are as The following is additional information about transactions during the year ended May 31, 2020 for Monty Inc., which follows IFRS. Plant assets costing $69,000 were purchased by paying $47,000 in cash and issuing 5,000 common shares. In order to supplement its cash, Monty issued 4,000 additional common shares. Cash dividends of $35,000 were declered and paid at the end of the fiscal year. create direct method cash flow statement, show your workarrow_forward
- Following is additional information about transactiona during the year ended May 31, 2020 for Monty Inc., which follows IFRS. Plant assets costing $69,000 were purchased by paying $47,000 in cash and issuing 5,000 common shares. In order to supplement iRs cash, Monty Issued 4,000 additional common shares. Cash dividends of $35,000 were declared and paid at the end of the fiscal year. PRepare a direct Method Cash FLow using the format.arrow_forwardmake a trail balancearrow_forwardOn July 31, 2025, the general ledger of Cullumber Legal Services Inc. showed the following balances: Cash $4,960, Accounts Receivable $1,860, Supplies $620, Equipment $6,200, Accounts Payable $5,080, Common Stock $4,340, and Retained Earnings $4,220. During August, the following transactions occurred. Aug. 3 5 Collected $1,490 of accounts receivable due from customers. Received $1,610 cash for issuing common stock to new investors. 6 Paid $3,350 cash on accounts payable. 7 Performed legal services of $8,060, of which $3,720 was collected in cash and the remainder was due on account. 2 2 2 2 2 12 Purchased additional equipment for $1,490, paying $500 in cash and the balance on account. 14 Paid salaries $4,340, rent $1,120, and advertising expenses $340 for the month of August. 18 20 24 26 27 Collected the balance for the services performed on August 7. Paid cash dividend of $620 to stockholders. Billed a client $1,240 for legal services performed. Received $2,480 from Laurentian Bank;…arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





